Việt Nam great at franchising: experts

HCM CITY — Việt Nam is showing huge potential for franchising, with dozens of franchises having been established and more new brands expected to enter the market in the next five to 10 years, according to analysts.

Figures from the Ministry of Industry and Trade show that since 2007, more than 144 foreign franchises have been licensed in the country.

Đinh Thị Mỹ Loan, chairwoman of the Việt Nam Retailers Association, said with its high growth rate, 90 million population -- of whom 60 per cent are young consumers -- and modern trade channels accounting for just 25 per cent of retail business, the country is an attractive retail market for foreign investors.

Sean Ngo, director of Việt Nam Franchise Consulting, said the number of franchises in Việt Nam is forecast to increase substantially given the establishment of the ASEAN Economic Community and the number of free trade agreements the country has signed.

The food and beverage industry has seen franchising develop strongly, especially in the fast foods segment, he said.

Food consumption in the country is expected to grow by 61.6 per cent between 2012 and 2017, while nearly 50 per cent of household expenditure is on food and beverages, he said.

Nguyễn Phi Vân, founder of Retail and Franchise Asia, said franchising is a common strategy companies choose when expanding internationally.

In the 10 leading food groups, only two still own more than 50 per cent of their outlets.

In 2008, Burger King owned 12 per cent of its outlets, but the number fell to 0.4 per cent in 2013, while Subway does not own any outlet, Vân said.

She said franchising has considerable potential in more sectors, like education and healthcare.

But to be successful, franchisees need to make sure they have a good business plan and management, she said.

The biggest mistake Vietnamese franchisees make is that they spend a lot of money to buy the franchise but not to build a management team to run it, she said.

Franchise in other countries

Vân said the franchise market in Việt Nam is still in its infancy, and when foreign franchises come to the country, local firms can learn from them how to create their own franchises in the future.

Vietnamese companies could become global franchisers in the food sector, but their poor management prevents them from doing so, she said.

She and the others experts were speaking at the Việt Nam International Retail and Franchise show held in HCM City last week — VNS